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PETITIONER: UCO BANK, CALCUTTA

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, WEST BENGAL

DATE OF JUDGMENT:       13/05/1999

BENCH: Sujata V.Manohar, D.P.Mohapatra, R.C.Lahoti

JUDGMENT:

Mrs. Sujata V. Manohar, J.

Civil Appeal No.235 of 1996

     Civil Appeal No.235 of 1996 pertains to the assessment of the income of the appellant, United Commercial Bank Ltd., for  the assessment year 1981-82.  The assessee had credited a  total  sum  of  Rs.49,15,435/- by way of  interest  to  a suspense  account  since  recovery of the  said  amount  was doubtful  and no recovery of the said amount or any part  of it which was by way of interest on loans advanced by it, had been  effected  in the three previous years.   The  assessee excluded  the said sum of Rs.49,15,435/- while computing its total income.

     The Income-tax department completed the assessment for assessment  year  1981-82  on  28th of  February,  1985,  by following  the  Central  Board  of  Direct  Taxes   Circular No.F.201/21/84  TTA-II dated 9th of October, 1984  excluding from  the  total  income of the assessee, the  said  sum  of Rs.49,15,435/-  while  computing  the total  income  of  the assessee.   The Commissioner of Income-tax on examination of the  assessment records considered the exclusion of the said sum of Rs.49,15,435/- to be erroneous and prejudicial to the interest  of the revenue.  By his order dated 5th of  March, 1987  he included the said amount in the total income of the assessee.   On appeal, the Income-tax Appellate Tribunal, by its  order  dated  14.10.1988,  allowed the  appeal  of  the assessee.   A  reference was made to the High Court  at  the instance  of  the  revenue  under   Section  256(1)  of  the Income-tax  Act.  The following question was referred to the High Court:

     "Whether, on the facts and in the circumstances of the case,  the  Tribunal is justified in law in  cancelling  the CIT’s  order under section 263 of the Income-tax Act holding that  when  the  assessment was completed,  the  only  paper available  was the Board’s circular dated 9th October,  1984 and,  therefore,  it cannot be said that the IAC’s order  of assessment   not   taxing  the   interest  in  suspense   of Rs.49,15,435/-  in  view of that circular was erroneous  and prejudicial to the interest of revenue."

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     The High Court has answered the reference in favour of the  revenue in view of the decision of this Court in  State Bank  of  Travancore v.  Commissioner of Income-tax,  Kerala [(1986) 158 ITR 102].

     We  have to consider whether interest on a loan  whose recovery is doubtful and which has not been recovered by the assessee-bank  for the last three years but has been kept in a  suspense  account and has not been brought to the  profit and  loss  account of the assessee, can be included  in  the income  of the assessee for the assessment year 1981-82.  It is  the case of the assessee that in respect of loans  which are  advanced  by it to various customers, recovery of  some loans  is  very doubtful.  It is doubtful whether  even  the interest  on  the loans advanced will be recovered from  the customer.   In  such cases, the interest calculated  on  the loan  amount is credited in a suspense account.  This amount is  not  brought  to  the profit and  loss  account  of  the assessee-bank because these are amounts which are not likely to  be realised by the bank.  Hence they do not form a  part of the real income of the bank.  If and when any such amount or  a  part  of  it is recovered, it  is  included  in  that assessment  year in the total income of the assessee for the purpose of payment of income-tax.

     The  method  of  accounting which is followed  by  the assessee-bank  is mercantile system of accounting.  However, the  assessee considers income by way of interest pertaining to doubtful loans as not real income in the year in which it accrues,  but  only when it is realised.  A mixed method  of accounting  is  thus  followed by the  assessee-bank.   This method  of  accounting  adopted  by   the  assessee  is   in accordance with accounting practice.  In Spicer and Pegler’s Practical  Auditing  the relevant passage occurring at  page 186-187 has been reproduced in the minority judgment of this Court  in  State  Bank  of Travancore  v.   Commissioner  of Income-tax,  Kerala [(1986) 158 ITR 102 at p.120].  It is as follows:

     "Where  interest  has not been paid, it  is  sometimes left   out  of  account   altogether.   This  prevents   the possibility  of  irrecoverable  interest being  credited  to revenue, and distributed as profit.  On the other hand, this treatment  does  not  record the actual state  of  the  loan account,  and in the case of banks and other concerns  whose business  it  is to advance money, it is usual to  find  the interest  is regularly charged up, but when its recovery  is doubtful,  the  amount  thereof  is  either  fully  provided against  or  taken  to the credit of  an  Interest  Suspense Account  and carried forward and not treated as profit until actually received."

     Similarly,  referring  to interest on doubtful  debts, Shukla  and  Grewal on Advanced Accounts, Ninth  Edition  at page 1089 state as follows:

     "Interest  on doubtful debts should be debited to  the loan  account  concerned  but  should  not  be  credited  to interest  account.   Instead,  it   should  be  credited  to Interest  Suspense  Account.  To the extent the interest  is received  in  cash, the Interest Suspense Account should  be transferred  to  Interest  account;   the  remaining  amount should  be  closed  by transfer to the Loan  account.   This treatment  accords with the principle that no item should be

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treated  as income unless it has been received or there is a reasonable certainty that it will be realised."

     (Vide State Bank of Tranvacore v.  CIT [supra])

     The   assessee’s  method  of  accounting,   therefore, transferring  the  doubtful  debt to  an  interest  suspense account  and  not  treating  it  as  profit  until  actually received, is in accordance with accounting practice.

     Under  Section 145 of the Income-tax Act, 1961, income chargeable  under the head "profits and gains of business or profession  or income from other sources" shall be  computed in  accordance  with  the  method  of  accounting  regularly employed by the assessee;  provided that in a case where the accounts are correct and complete but the method employed is such  that  in the opinion of the Income- tax  Officer,  the income cannot properly be deduced therefrom, the computation shall  be  made  in  such manner and on such  basis  as  the Income-tax  Officer may determine.  In the present case  the method  employed  is entirely for a proper determination  of income.

     For  this same reason, and to aid proper determination of  income,  the  Central Board of Direct Taxes  had  issued Circular  No.41(V-6)D of 1952 dated 6th October, 1952.   The circular,  inter  alia, stated that "interest accruing to  a money  lender  on  loans  entered in  the  suspense  account because of the extreme unlikelihood of their being recovered need not be included in the assessee’s taxable income if the Income-tax  Officer is satisfied that there is really little probability  of  the loans being repaid.  It  is  considered desirable  to extend this principle to banks which,  instead of  transferring  the doubtful debts to a suspense  account, credit  the interest on such debts to that account  provided the  Income-tax  Officer  is   satisfied  that  recovery  is practically  improbable."  This circular was in  force  till 20th  of  June, 1978 when the Central Board of Direct  Taxes issued  a circular dated 20th of June, 1978 withdrawing with immediate  effect  the earlier circular of 6th  of  October, 1952.  The reason for the withdrawal of the circular of 1952 is  set  out  in the circular of 20th of  June,  1978.   The reason  is  stated thus:  "the Board has been  advised  that where  accounts  are  kept  on  mercantile  basis,  interest thereon  is taxable irrespective of whether the interest  is credited  to  suspense account or to interest account.   The Kerala  High  Court has also expressed the same view in  the case  of  State  Bank  of  Travancore  v.   Commissioner  of Income-tax,  Kerala  [110  ITR  336].  The  amount  of  such interest  is, therefore, includible in the taxable  income." The withdrawal of the circular of 6th of October, 1952 which had been in force for thirty six years was on account of the decision  of  the  Kerala  High   Court  in  State  Bank  of Travancore  v.  Commissioner of Income-tax, Kerala  (Supra). The  Central Board of Direct Taxes, however, issued  another circular  of  9th of October, 1984 under which  the  Central Board  of Direct Taxes decided that "interest in respect  of doubtful  debts credited to suspense account by the  banking companies  will be subjected to tax but interest charged  in an  account  where  there  has been no  recovery  for  three consecutive accounting years will not be subjected to tax in the  fourth  year  and onwards.  However, if  there  is  any recovery  in  the  fourth year or later  the  actual  amount

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recovered  only  will be subjected to tax in the  respective years.   This procedure will apply to assessment year  1979- 80  and  onwards.   The Board’s  Instruction  No.1186  dated 20.6.78  is modified to this extent." The same circular  has also  further  clarified that upto assessment year 1978-  79 the  taxability  of interest on doubtful debts  credited  to suspense account will be decided in the light of the Board’s earlier  circular  dated 6.10.1952 as the said circular  was withdrawn  only in June, 1978.  The new procedure under  the circular  of 9th of October, 1984 will be applicable for and from  the assessment year 1979-80.  All pending disputes  on the   issue  should  be  settled  in  the  light  of   these instructions.   Therefore, upto the assessment year 1978-79, the  Central Board of Direct Taxes’ circular of 6th October, 1952  would  be applicable;  while from the assessment  year 1979-80,  the Central Board of Direct Taxes’ circular of 9th of  October, 1984 is made applicable.  In the present  case, the assessment was made on the basis of the Central Board of Direct  Taxes  circular of 9th of October, 1984,  since  the assessment  pertains to assessment year 1981-82 to which the circular of 6th October, 1984 is applicable.

     What is the status of these circulars?  Section 119(1) of  the  Income-tax  Act, 1961 provides that,  "The  Central Board  of  Direct Taxes may, from time to time,  issue  such orders,  instructions  and  directions to  other  income-tax authorities as it may deem fit for the proper administration of  this  Act  and such authorities and  all  other  persons employed  in  the  execution of this Act shall  observe  and follow  such  orders,  instructions and  directions  of  the Board.   Provided  that  no  such  orders,  instructions  or directions  shall  be  issued  (a)  so  as  to  require  any income-tax  authority to make a particular assessment or  to dispose of a particular case in a particular manner;  or (b) so  as  to  interfere with the discretion of  the  Appellate Assistant  Commissioner  in  the exercise of  his  appellate functions".   Under sub-section (2) of Section 119,  without prejudice  to the generality of the Board’s power set out in sub-section  (1), a specific power is given to the Board for the  purpose of proper and efficient management of the  work of  assessment and collection of revenue to issue from  time to time general or special orders in respect of any class of incomes  or  class  of  cases setting  forth  directions  or instructions,  not  being prejudicial to assessees,  as  the guidelines,  principles or procedures to be followed in  the work  relating  to assessment.  Such instructions may be  by way  of relaxation of any of the provisions of the  sections specified  there  or otherwise.  The Board thus  has  power, inter  alia, to tone down the rigour of the law and ensure a fair  enforcement of its provisions, by issuing circulars in exercise  of  its statutory powers under Section 119 of  the Income-tax  Act which are binding on the authorities in  the administration  of  the  Act.    Under  Section   119(2)(a), however,  the  circulars as contemplated therein  cannot  be adverse  to the assessee.  Thus, the authority which  wields the  power for its own advantage under the Act is given  the right to forego the advantage when required to wield it in a manner  it considers just by relaxing the rigour of the  law or in other permissible manners as laid down in Section 119. The  power  is  given for the purpose of  just,  proper  and efficient management of the work of assessment and in public interest.   It is a beneficial power given to the Board  for proper  administration of fiscal law so that undue  hardship may not be caused to the assessee and the fiscal laws may be correctly  applied.   Hard  cases   which  can  be  properly

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categorised  as belonging to a class, can thus be given  the benefit of relaxation of law by issuing circulars binding on the taxing authorities.

     The  question  whether interest earned, on  what  have come  to  be known as "sticky" loans, can be  considered  as income  or not until actual realization, is a question which may  arise  before  several income tax  officers  exercising jurisdiction  in different parts of the country.  Under  the accounting  practice,  interest which is transferred to  the suspense  account  and  not brought to the profit  and  loss account  of  the  company  is not treated  as  income.   The question  whether in a given case such "accrual" of interest is doubtful or not, may also be problematic.  If, therefore, the  Board has considered it necessary to lay down a general test for deciding what is a doubtful debt, and directed that all  income  tax officers should treat such amounts  as  not forming  part of the income of the assessee until  realized, this  direction by way of a circular cannot be considered as travelling  beyond the powers of the Board under Section 119 of  the  Income Tax Act.  Such a circular is  binding  under Section  119.   The  circular  of   9th  of  October,  1984, therefore,  provides a test for recognising whether a  claim for  interest can be treated as a doubtful claim unlikely to be recovered or not.  The test provided by the said circular is  to see whether, at the end of three years, the amount of interest  has,  in fact, been recovered by the bank or  not. If  it is not recovered for a period of three years, then in the fourth year and onwards the claim for interest has to be treated  as  a doubtful claim which need not be included  in the income of the assessee until it is actually recovered.

     In  the  case of Navnitlal C.  Javeri v.   K.K.   Sen, Appellate  Assistant Commissioner of Income-Tax, ’D’  Range, Bombay  (1965  (1)  SCR  909),  the  legal  effect  of  such circulars  is,  inter  alia, considered by a Bench  of  five judges  of this Court.  Section 2(6A)(e) and Section  12(1B) were  introduced in the Income-tax Act by the Finance Act 15 of  1955  which came into force on 1st of April, 1955.   The Government,  however, realised that the operation of Section 12(1B)  would lead to extreme hardship because it would have covered the aggregate of all outstanding loans of past years and  would  impose  an unreasonably high  liability  on  the shareholders  to  whom the loans might have  been  advanced. The  Minister,  therefore, gave an assurance  in  Parliament that  outstanding  loans  and advances which  are  otherwise liable  to  be  taxed as dividends in the  assessment  years 1955-56  will  not be subjected to tax if it is  shown  that they had been genuinely refunded to the respective companies before  30th  of  June, 1955.  Accordingly, a  circular  was issued  by the Central Board of Revenue on 10th of May, 1955 pointing  out to all income tax officers that it was  likely that  some  of  the companies might have advanced  loans  to their  shareholders  as a result of genuine transactions  of loans,  and the idea was not to affect such transactions and not  bring  them within the mischief of the  new  provision. The  officers, therefore, were asked to intimate to all  the companies that if the loans were repaid before 30th of June, 1955  in  a  genuine manner, they would not  be  taken  into account in determining the tax liability of the shareholders to whom they may have been advanced despite the new section. This  circular  was  held by this court as  binding  on  the Revenue,  though limiting the operation of Section 12(1B) or excluding  certain  transactions from the ambit  of  Section 12(1B).   It was so held because the circular was considered

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as  issued  for the purpose of proper administration of  the provisions of Section 12(1B) and the court did not look upon this circular as being in conflict with Section 12(1B).

     A similar view of CBDT circulars has been taken in the case of K.P.  Varghese v.  Income Tax Officer, Ernakulam and Ors.   (1981  (4) SCC 173 [at page 188]), by a Bench of  two judges consisting of P.N.  Bhagwati and E.S.  Venkataramiah, JJ.   The Bench has held that circulars of Central Board  of Direct  Taxes  are legally binding on the Revenue  and  this binding  character attaches to the circulars even if they be found  not in accordance with the correct interpretation  of the   section  and  they  depart   or  deviate   from   such construction.   Citing the decision of Navnitlal C.   Javeri v.   K.K.   Sen (Supra), this Court observed that  circulars issued  by  the Central Board of Direct Taxes under  Section 119  of  the  Act are binding on all  officers  and  persons employed  in  the execution of the Act even if they  deviate from  the provisions of the Act.  In Keshavji Ravji and  Co. v.  Commissioner of Income-Tax (1990 [183] ITR 1) a Bench of three  judges  of  this Court has also taken the  view  that circulars  beneficial  to the assessee which tone  town  the rigour  of  the  law  and  are issued  in  exercise  of  the statutory  powers  under  Section  119 are  binding  on  the authorities  in the administration of the Act.  The  benefit of  such circulars is admissible to the assessee even though the  circulars might have departed from the strict tenor  of the statutory provision and mitigated the rigour of the law. This  Court,  however,  clarified   that  the  Board  cannot pre-empt a judicial interpretation of the scope and ambit of a  provision  of the Act.  Also a circular cannot impose  on the tax-payer a burden higher than what the Act itself, on a true  interpretation, envisages.  The task of interpretation of the laws is the exclusive domain of the courts.  However, the  Board has the statutory power under Section 119 to tone down  the rigour of the law for the benefit of the  assessee by  issuing  circulars to ensure a proper administration  of the  fiscal  statute and such circulars would be binding  on the authorities administering the Act.

     In  the  case of C.B.  Gautam v.  Union of  India  and Ors.   (1993  (199)  ITR 530 at page 546) a  Bench  of  five judges  of this Court considered as enforceable, Instruction No.1A88 issued by the Central Board of Direct Taxes relating to  the enforcement of the provisions of Chapter XX-C of the Income-tax  Act.  The Central Board pointed out in the  said instruction that in administering the provisions of the said Chapter,  it has to be ensured that no harassment is  caused to  bona fide and honest purchasers or sellers of  immovable property  and that the power of pre-emptive purchase has  to be  exercised by the appropriate authority only when it  has good reason to believe that the property has been sold at an undervalue  and  there  is  payment of black  money  in  the transaction.   The instruction that when the property is put up  for sale by the appropriate authority, the reserve price should be fixed at a minimum of 15% above the purchase price shown  as  the  apparent consideration under  the  agreement between  the  parties,  was  held  to  be  binding  on   the authority.   The  Constitution Bench in the above case  also approved  of the decision of this Court in K.P.  Varghese v. Income Tax Officer (Supra).

     There  are, however, two decisions of this Court which have  been  strongly relied upon by the respondents  in  the present  case.  The first decision is the majority  judgment

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in  The State Bank of Travancore v.  Commissioner of Income- Tax, Kerala (1986 (158) ITR 102) decided by a Bench of three Judges  of  this  court by a majority of two to  one.   This judgment  directly deals with interest on "sticky  advances" which  have  been debited to the customer but taken  to  the interest  suspense  account  by  a  banking  company.    The majority  judgment  has referred to the circular of  6th  of October,  1952 and its withdrawal by the second circular  of 20th  of June, 1978.  The majority appears to have proceeded on  the  basis that by the second circular of 20th of  June, 1978  the  Central Board had directed that interest  in  the suspense  account on "sticky" advances should be  includible in  the taxable income of the assessee and all pending cases should  be  disposed of keeping these instructions in  view. The  subsequent  circular of 9th of October, 1984 by  which, from  the assessment year 1979-80 the banking companies were given  the benefit of the circular of 9th of October,  1984, does not appear to have been pointed out to the Court.  What was submitted before the Court was, that since such interest had  been  allowed  to  be exempted for  more  than  half  a century,  the  practice had transformed itself into law  and this   position   should  not   have  been  deviated   from. Negativing this contention, the Court said that the question of  how  far  the  concept of real income  enters  into  the question of taxability in the facts and circumstances of the case,  and  how far and to what extent the concept  of  real income  should intermingle with the accrual of income,  will have  to  be judged "in the light of the provisions  of  the Act,  the principles of accountancy recognised and followed, and feasibility".  The Court said that the earlier circulars being  executive in character cannot alter the provisions of the  Act.   These  were in the nature of  concessions  which could  always  be prospectively withdrawn.  The  Court  also observed  that  the circulars cannot detract from  the  Act. The  decision  of  the Constitution Bench of this  Court  in Navnitlal  C.   Javeri  v.   K.K.    Sen  (Supra),  or   the subsequent decision in K.P.  Varghese v.  Income Tax Officer (supra)  also do not appear to have been pointed out to  the Court.   Since  the  later  circular of  9.10.1984  was  not pointed  out to the Court, the Court naturally proceeded  on the  assumption  that the benefit granted under the  earlier circular  was no longer available to the assessee and  those circulars  could  not  be  resorted to for  the  purpose  of overcoming  the  provisions of the Act.  Interestingly,  the concurring  judgment of the second judge has not dealt  with this question at all but has decided the matter on the basis of other provisions of law.

     The  said  circulars under Section 119 of the  Income- tax  Act  were  not placed before the Court in  the  correct perspective  because  the later circular continuing  certain benefits  to the assessees was overlooked and the  withdrawn circular  was  looked  upon as in conflict with  law.   Such circulars,  however,  are  not meant  for  contradicting  or nullifying any provision of the statute.  They are meant for ensuring  proper  administration  of the statute,  they  are designed  to  mitigate the rigours of the application  of  a particular provision of the statute in certain situations by applying  a  beneficial interpretation to the  provision  in question  so  as  to  benefit  the  assessee  and  make  the application of the fiscal provision, in the present case, in consonance  with  the concept of income and  in  particular, notional  income  as  also the treatment  of  such  notional income under accounting practice.

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     In  the  premises the majority decision in  the  State Bank  of  Travancore v.  Commissioner of Income-Tax  (Supra) cannot  be looked upon as laying down that a circular  which is  properly issued under Section 119 of the Income-tax  Act for  proper administration of the Act and for relieving  the rigour  of  too  literal a construction of the law  for  the benefit  of the assessee in certain situations would not  be binding  on  the  departmental authorities.  This  would  be contrary  to the ratio laid down by the Bench of five judges in  Navnitlal  C.  Javeri v.  K.K.  Sen (Supra).   In  fact, State  Bank  of Travancore v.  Commissioner of  Income-  Tax (Supra)  has  already  been  distinguished in  the  case  of Keshavji  Ravji  and  Co.  v.   Commissioner  of  Income-Tax (Supra) by a Bench of three judges in a similar fashion.  It is held only as laying down that a circular cannot alter the provisions  of  the  Act.   It  being in  the  nature  of  a concession, could always be prospectively withdrawn.  In the present  case,  the circulars which have been in  force  are meant  to ensure that while assessing the income accrued  by way  of  interest on a "sticky" loan, the notional  interest which  is  transferred to a suspense account  pertaining  to doubtful  loans  would not be included in the income of  the assessee,  if for three years such interest is not  actually received.   The  very  fact   that  the  assessee,  although generally  using  a mercantile system of  accounting,  keeps such  interest  amounts in a suspense account and  does  not bring  these amounts to the profit and loss account, goes to show  that  the  assessee  is following a  mixed  system  of accounting  by which such interest is included in its income only when it is actually received.  Looking to the method of accounting  so  adopted by the assessee in such  cases,  the circulars  which  have been issued are consistent  with  the provisions  of  Section  145 and are meant  to  ensure  that assessees  of the kind specified who have to account for all such  amounts  of interest on doubtful loans  are  uniformly given  the  benefit  under the circular  and  such  interest amounts are not included in the income of the assessee until actually  received  if  the conditions of the  circular  are satisfied.   The  circular of 9.10.1984 also serves  another practical  purpose  of  laying down a uniform test  for  the assessing  authority  to decide whether the interest  income which  is  transferred to the suspense account is, in  fact, arising  in respect of a doubtful or "sticky" loan.  This is done by providing that non-receipt of interest for the first three  years  will not be treated as interest on a  doubtful loan.   But if after three years the payment of interest  is not  received,  from  the  fourth year onwards  it  will  be treated  as interest on a doubtful loan and will be added to the income only when it is actually received.

     We  do  not  see any  inconsistency  or  contradiction between  the  circular  so  issued and Section  145  of  the Income-tax  Act.  In fact, the circular clarifies the way in which  these amounts are to be treated under the  accounting practice  followed by the lender.  The circular,  therefore, cannot  be  treated  as  contrary  to  Section  145  of  the Income-tax  Act  or illegal in any form.  It is meant for  a uniform  administration  of  law  by   all  the  income  tax authorities  in a specific situation and, therefore, validly issued  under  Section 119 of the Income-tax Act.  As  such, the circular would be binding on the Department.

     The other judgment on which reliance was placed by the Department  was a judgment of a Bench of two judges of  this Court  in  Kerala Financial Corportion V.   Commissioner  of

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Income-Tax  (1994  (4) SCC 375) where this Court,  following the   majority  view  in  State   Bank  of   Travancore   v. Commissioner  of Income-Tax (Supra) held that interest which had  accrued  on  a "sticky" advance has to  be  treated  as income of the assessee and taxable as such.  It is said that ultimately,  if  the advance takes the shape of a bad  debt, refund  of the tax paid on the interest would become due and the  same can be claimed by the assessee in accordance  with law.   For  reasons set out above, we are not  in  agreement with  the said judgment.  The relevant circulars of C.B.D.T. cannot  be ignored.  The question is not whether a  circular can override or detract from the provisions of the Act;  the question  is  whether  the circular seeks  to  mitigate  the rigour  of  a  particular  section for the  benefit  of  the assessee  in  certain specified circumstances.  So  long  as such  a  circular  is in force it would be  binding  on  the departmental  authorities  in  view  of  the  provisions  of Section  119  to ensure a uniform and proper  administration and application of the Income-tax Act.

     The  appeal is, therefore, allowed and the question is answered  in  favour  of  the   assessee  and  against   the department.

     Civil Appeal No.  9885-87 of 1996 and 10408 of 1996 :

     These  two  appeals  are  filed   by  M/s  Tamil  Nadu Industrial  Investment Corporation Ltd.  The question raised is similar to the question which we have considered in Civil Appeal  No.  235 of 1996 pertaining to the United Commercial Bank  Ltd.   In  these two appeals the  relevant  assessment years  are  1972-73, 1973-74, 1974-75 and 1976- 77.   During these  assessment years the circular which was in force  was the circular of 6th of October, 1952.  This circular, unlike the  later  circular of 9.10.1984 which applies  to  banking companies, applies to interest accruing to a money lender on loans  entered in a suspense account because of the  extreme unlikelihood  of  their  being recovered.  The  circular  is widely worded to include within its ambit a public financial institution  such as the assessee.  In view of this circular which  was  then  in  force and which  was  binding  on  the assessing  authorities,  these two appeals also have  to  be allowed  for  reasons which we have set out in Civil  Appeal No.   235  of  1996.   These appeals  are  also,  therefore, allowed  and the question referred is answered in favour  of the assessee and against the department.